2nd interim report

This report contains questions, findings and recommendations on two topics important to raising services-sector productivity:

stimulating a more competitive environment; and

the successful adoption of information and communications technology (ICT) by service firms.

In the 1st interim report, we also proposed the following possible topic in the next stage of our inquiry:

Improving occupational licensing in the services sector – Occupational licensing is common across the services sector. It helps to mitigate the problems that can arise as a result of the complexity and information asymmetries (ie where the seller knows more than the buyer about the quality of the service) that are inherent in many service transactions. However, the benefits of occupational licensing need to be clearly articulated, demonstrated, and balanced against the costs. For example applying entry restrictions to certain professions can reduce competition, creating adverse outcomes for customers.

While there does appear to be scope to lift productivity through improvements to New Zealand’s occupational licensing system, we felt that the size and complexity of this topic made it better suited to a dedicated inquiry, and therefore decided against pursuing it further in this current inquiry.

Murray Sherwin outlines why competition is important for the services sector and what the Commisssion recommends to boost competition.

Geoff Lewis talks about ways ICT can boost productivity in the services sector.

Paul Conway, Director, Economics and Research, looks at the relationship between ICT and New Zealand's productivity performance over the last few decades.

1st interim report

September 2013

Our 1st interim report highlighted that we have a strong understanding of our primary and manufacturing industries, but we need a better understanding of the myriad ways that services add value to our economy, our employment and our incomes. The services sector effectively contributes more than half the value of the country’s exports. This occurs primarily through their embodiment in exported goods, such as transport and warehousing services through to finance and insurance services.

These services are integral to the success of our primary and manufacturing industries, in both domestic and international markets. The productivity challenges for services industries are similar to those for other sectors of the economy. They include achieving scale, specialisation and tradability within the context of New Zealand’s small size and distance from international markets. Having the right regulatory settings is important to help service industries tackle such challenges.

By fostering competition and innovation we can develop smarter services. In turn, smarter service inputs can improve the quality, variety and sophistication of the goods we are producing. And we’re not just talking about service contributions to goods - we can also increase our international trade in services themselves.

The report called for feedback on which two topics the Commission should focus for more in-depth investigation during the second phase of the inquiry.

Murray Sherwin, Commission Chair gives an overview ofthe nature and role of services in the NZ economy.

Geoff Lewis, Inquiry Director outlines the potential topicsfor further study in the next stage of the inquiry.

Register your interest

The Commission seeks your assistance in gathering ideas, opinions and information to ensure the inquiry is well-informed and relevant. The Commission will keep registered participants informed as the inquiry progresses.